24 Nov, 2021
The government is going to ban online casinos. Prime Minister Irakli Gharibashvili announced this at the government meeting held on November 22. According to the Prime Minister, in the first stage, the tax for the owners of online casinos will be increased, advertising will be banned and the age limit will be raised to 25 years. The next step will be to shut down online casinos because "99% of the users are poor people, those who don't work." The gaming business, for which the government's decision was a surprise, is demanding a negotiated solution to the issue.
According to the Prime Minister, the majority of online casinos today are foreign companies and through them 1.5 billion GEL will flow out of the country. Irakli Gharibashvili says that the tax base of gambling will be completely changed. In particular, GGR (Gross gaming revenue) i.e. incoming bets and paid winnings will be taxed. The government is convinced that the increased tax burden will reduce the availability of gambling.
What does the business respond to the government?
"Prohibition is not the solution," the gaming business says. Companies believe that the ban will not bring the result that the government wants to achieve. On the contrary, a large part of gambling will become shadowy and move underground, which will create additional problems in the country.
"Gaming business in Georgia is efficiently and transparently regulated. We are in constant consultation with the government-appointed regulator for the sector and are open to further consultation. I hope the government will start a constructive dialogue, listen to our opinion and make the right decision", Giorgi Mamulaishvili, the head of the administration of the Gaming Business Association, said while talking to Business Feed.
Gaming business revenue
Gambling is one of the most profitable businesses in Georgia. The revenues of online casinos are especially growing, and the number of users has increased even more during the pandemic. According to Saxstat, the turnover of this sector increased by 24% in 2020 and reached a record 32 billion GEL. Gaming business representatives say that the increase in turnover does not mean that the profit increases proportionally. The amount of turnover is determined by the sum of the bets placed each time and does not bring profit to the business every time. According to the data of the sector, the total business profit last year was 362.6 million GEL. A large part of this money comes from online casinos.
By 2021, 133 gambling companies are operating on the market. Their number in 2019 was 145. The largest companies are LLC Mars, LLC Aviator, LLC Betlive, LLC Full House, LLC Champions 111, LLC Lider-Bet Slot. At the same time, these companies are included in the list of the 10 largest companies in the country.
What do the biggest companies in Georgia pay for business?
In 2020, the gambling business contributed a total of 350 million GEL to the state budget (416 million GEL was paid in 2019). The turnover of the gambling business is taxed at a rate of 7%. In addition, the business pays VAT, profit tax; Income and property tax. Also, the fee for the permission to organize a casino, slot machine parlor, bookmaker, lotto, bingo and incentive draw.
Random Systems, the company hired by the government to oversee the gaming business sector, says the sector has potential for growth and they are working with the government to do so. One of their recommendations involves tightening the regulation of this area.
What does the gaming business contribute to the economy?
According to data from Random Systems, gaming business currently makes up 2% of the country's economy, and its share will increase if the sector develops. The development of this sector in Georgia was facilitated by the policies of neighboring countries - Turkey and Iran, where casinos are prohibited. Also, the presence of restrictions in Azerbaijan and Russia, which contributed to the entry of tourists from these regions. The purpose of their visit to Georgia, in addition to travel, is gambling, which brings additional economic income to the country. The legalization of gambling led to the entry of large foreign gambling companies into Georgia, including the American IGT, the Swedish Betsson, which means the creation of additional investments and jobs. According to Random Systems, other well-known companies are also planning to enter the country. However, the tightening of regulations may change their decision.
What does the ban do?
As representatives of the gaming business say, the ban on online casinos has not been successful. After the ban, the business became shady and uncontrolled. In addition, countries that have banned online gambling have lost significant revenue as gamblers have shifted their bets to offshore sites. Statistics show that this industry is developing internationally. In 2020, the online gambling market in Europe grew by 28%, which was also helped by the covid pandemic.
Since the ban on online casinos in Germany, many Germans have been illegally participating in online gaming in the American or Asian markets. Although gambling is a problematic issue in Germany as well (both politically and morally), the country legalized online gambling this year, albeit under strict supervision. Online casinos operate under complex legal restrictions.
During the pandemic, the income of online casinos in the USA increased 3 times. For example, Utah is one of two US states (along with Hawaii) that prohibits all forms of gambling. Players based in Utah play on offshore online sites. Players move to casinos in border towns and money flows to neighboring states where gambling is allowed.
